The Credit Hire debate rises to the rarefied atmosphere of the Court of Appeal where the intangible feelings of driving a prestige vehicle are real and compensable

On 18 June 2020, the NSW Court of Appeal considered four claims where similar legal questions arose in relation to when a claimant, who has lost the use of a non-income producing vehicle, is entitled to recover the cost of hiring a replacement, and the principles that govern the determination of the reasonable cost of that replacement.

 

Authors: Paul Garnon, Kate Blue, Paul Dalligan, Raphael Hermiz, Tina Perrotta, Victor Hoang, Mia Ioannou, Catherine Marangos
Judgment date: 18 June 2020
Citation: Lee v Strelnicks; Souiad v Nahas; Cassim v Nugyen; and Rixon v Arsalan [2020] NSWCA 115
Jurisdiction: Court of Appeal

Principles


  • A claimant must establish a "need" for a replacement vehicle. In determining "need" regard must be had to the principle of restitutio in integrum to put the claimant in the position he or she would have been but for the wrongdoing.
  • Once "need" is established, the reasonableness of the claimant's hire expenditure must be considered and this involves:

    • identifying if an equivalent vehicle is available (make, model and year); and
    • if not available, identifying a car that is as close to equivalent as possible.
  • The measure of damages should be no more than the cost of hiring an equivalent, or as close as possible to equivalent vehicle in the market.

Background

There has been a myriad of claims in the Small Claims and General Division of the Local Court where there is often great debate as to the proper assessment of damages for the loss of use of a motor vehicle. Each case will often turn on its own facts.

The increase in the number of these claims is related to the growth of businesses providing "accident car hire" or "credit car hire" arrangements. These companies provide (i) hire cars to the victims of collisions not at fault, (ii) the hire car is of similar value and type to the damaged vehicle, (iii) the vehicle is provided on credit, at no upfront cost to the hirer, and (iv) the hire company agrees to pursue the at fault party to pay the amount of the rental as compensation for loss of use of the damaged vehicle.

In unrelated accidents, four motor vehicle owners (each a claimant) suffered damage by reason of a negligent driver colliding with their vehicles. While the vehicles were undergoing repair, each owner hired a replacement vehicle for some or all of the repair period. In three cases the damaged vehicles were "prestige vehicles" and the owners hired similar vehicles while the repairs were undertaken. The owners each claimed the full cost of hiring the replacement prestige vehicle as damages against the relevant tortfeasor in the Local Court, but only one of the claims was entirely successful. Either by way of appeal or judicial review, the cases were subsequently heard by the Supreme Court.

On appeal and review the primary judges made various findings but the critical one was that the claimant could only recover the cost of hiring a functionally equivalent vehicle, not necessarily the cost of an equivalent "prestige vehicle". If the vehicle was only used to go from A to B then all that was required was a vehicle to go from A to B. If the vehicle damaged was a prestige vehicle the claimant would need to provide specific reasons and detail why the claimant required a prestige replacement vehicle while the repairs were being carried out.

The decisions were appealed.

Decision

The principal issues before the Court were:
  1. Whether the claimant had a "need" for the replacement vehicle.
  2. If so, what constituted reasonable expenditure on hiring that replacement vehicle for the purpose of determining recoverable damages?
  3. The application of (i) and (ii) above to the cases before the Court.
The Court of Appeal carefully considered the different factual scenarios in the four matters and delivered its decisions in the concurrent proceedings on 18 June 2020.

  • Lee v Strelnicks – In this claim there was no evidence from the claimant in relation to the use of the damaged vehicle and as such there was a failure to establish the claimant had any need or suffered any loss. The Court of Appeal refused the application for leave to appeal.
  • Souaid v Nahas – In this claim the claimant gave evidence that he was content with any replacement vehicle, just as long as he had a vehicle which suited his objective need being "for my wife, for the kids and stuff". The Supreme Court concluded that the appropriate measure was the cost of hiring a Toyota Camry sedan as the claimant did not need a prestige vehicle equivalent to his damaged vehicle. The Court of Appeal determined there was no error in law noting this was a finding in fact and refused leave to appeal.
  • Cassim v Nguyen – In this claim the Court of Appeal allowed the appeal. The claimant established a need for a replacement vehicle. He preferred a prestige vehicle and he used it for work and transporting children and sporting equipment. The Court allowed the appeal. Noting the make, model and year of the damaged vehicle, a BMW 535i, he was allowed a Nissan Infiniti Q50, an equivalent vehicle even though he could have managed with a Toyota Corolla.
  • Rixon v Arsalan – In this claim it was accepted Mr Rixon had a need for a replacement vehicle. He drove an Audi A3 and while a Toyota Corolla would have been sufficient, he was entitled to an equivalent vehicle. The Court of Appeal determined that there was an error in law and allowed the appeal explaining that the claimant should be put in the same position he would have been had his vehicle not been damaged by the defendant and allowed the costs of hiring an equivalent Audi A3.
Three separate judgments were delivered, with White JA and Emmett JA forming the majority, and Meagher JA dissenting in part. The relevant principles might be distilled as follows:
  1. The overarching principle in relation to the assessment of damages in tort is to put the claimant back in the same position but for the tort being committed.
  2. The claimant has the onus of establishing a reasonable need for a replacement vehicle; once that onus is discharged, the onus of establishing that the hire of a particular vehicle was unreasonable lies on the defendant.
  3. Prima facie it can be inferred that the claimant will have a reasonable need for a "commensurate" vehicle or a "reasonably equivalent" vehicle or a "reasonable substitute" or a "broadly comparable" replacement vehicle.
  4. A reasonable need for a replacement vehicle is not to be assessed by considering only the "inconvenience" of transporting from A to B, but also the loss of the ability to do so in a vehicle which has the safety, luxury, and prestige of the damaged vehicle. The intangible nature of feelings derived from owning or driving a prestige vehicle does not mean they are unreal or non‑compensable.
  5. If there is an equivalent vehicle or one which is sufficiently similar, it remains necessary to determine whether the cost of hiring such a replacement vehicle is reasonable in all the circumstances.
The dissenting opinion of Meagher JA was consistent in relation to establishing the relevant need, but once established, his inquiry focussed on the reasonableness of the expenditure. He held that the relevant loss was the uses to which the damaged vehicle was likely to be put during the period of repair, and ordinarily such loss would be satisfied by the hire of a vehicle sufficiently comparable to the damaged vehicle in terms of functionality and specifications to satisfy the uses to which it was capable of being and likely to have been put.

Why this case is important

The Court of Appeal has been drawn into the car hire debate and no doubt considerable guidance will be sought based upon this decision. The principles outlined above do not represent a significant shift from the way in which most car hire claims are determined. It remains the case that a claimant must establish a reasonable need for a replacement hire car. Such a need is not self-proving and requires detailed particulars and evidence.

Once need is established, it can arguably be inferred that a like-for-like replacement vehicle is reasonable. There will be cases where this can be rebutted.

A plaintiff remains obligated to reasonably mitigate their loss and can only recover what expenditure is reasonable and commensurate to the replacement vehicle. The question of what is reasonable will depend on the market rate for that vehicle.

It is important to note that this case did not challenge or consider the rates relied upon nor, as noted by Meagher J, were the vehicles described with any greater specificity than high value or prestige. The detail around the damaged vehicle, its condition, age, make, and model, the existence of a comparable vehicle for hire, and the real market rate will all still require thorough investigation in order to assess the reasonable hire cost in all the circumstances.

The Court of Appeal has nonetheless departed from the well‑accepted approach to the replacement of a prestige vehicle with a vehicle capable of meeting the specification and functionality of the damaged vehicle. However, the learned dissenting judgment of Meagher J together with the opinion of Basten J ought not be dismissed lightly.

While the current Court of Appeal may be prepared to compensate the driver of a luxury vehicle for the intangible feelings derived from owning or driving such a prestigious vehicle, we would expect the High Court to be very interested in this approach. No doubt consideration is being given to taking this matter further. With the COMCAR fleet changing over following the closure of the Holden plant perhaps some discrete inquiries should be made to ascertain whether the Justices of the High Court have opted for the Toyota Camry or BMW 6 series sedan.

Contributors

Kate Blue Special Counsel
Paul Dalligan Special Counsel
Raphael Hermiz Associate
Tina Perrotta Lawyer
Victor Hoang Lawyer
Mia Ioannou Lawyer
Catherine Marangos Lawyer